When My Business Failed

We had 400 full-time employees. Sixteen U.S. offices. We were completing a year in which 58,009 people would participate in one of our long-distance walks or rides for charity, and would raise $169 million in contributions for AIDS, breast cancer and suicide prevention — $32 million more than the year before, which was $31 million more than the year before that.

The Avon Products Foundation — the charitable arm of the Fortune 500 cosmetics company, illegally appropriated our Breast Cancer 3-Day concept, and on August 11th, 2002, announced their plans for a multi-day walk for breast cancer with full-page ads in major papers across the country. This, after a five-year relationship with us in which we had increased their annual breast cancer research grant-making ability from about $5 million per year to $70.9 million per year, raising $194 million net in total for them over a five-year period — a huge sum in any vernacular, and unheard of in retail charitable fundraising.

A few months earlier, Avon had informed us that they no longer intended to do the events with us. They didn’t say specifically why — just that they were reviewing all of their fundraising activities. We were floored. They never said a word about their plans to compete with us directly. We owned the events — the name, the concept, the walker lists, and other intellectual property associated with them — so we lined up a new partner to be the beneficiary for the next season. But as a result of Avon’s full-page announcements, the new partner that we had lined up backed out — just seven days after the ads ran. The 3-Days were 75% of our business. It was like McDonald’s losing the hamburger. There was no time to raise the capital we needed to finance the events’ annual cash flow needs. So, on August 23, 2002, we shut our doors, and laid off all 400 employees, including me and my entire leadership team.

On August 23, 2002, I walked into our headquarters — a spectacularly creative facility that we had just moved into a few months earlier. The building was buzzing with the activity of 250 people — arguably some of the most passionate people ever employed under one roof. The next day, it was a ghost town, with just a few of us trying to strategize about what, if anything, could be done to save the company. We would come up empty.

To lose, in one fell swoop, the entire family you’ve been working with for years, everything you’ve spent twenty years building, and the home in which you all worked, and under the most unjust circumstances, is a kind of devastation I wouldn’t wish on my worst enemy. I had lost my partner to suicide just two years earlier. There was little difference between the two experiences in terms of the immediate sense of shock, grief, pain and sense of loss. It is a profoundly disorienting reality.

But that’s where the similarity with death ends. When someone close to you dies, sympathy reigns. People send flowers. The loss of the business couldn’t have been more different. On the day we were closing our doors, employees were coming up to me asking if they could start their own event businesses, ripping away what they could from the carcass of the company before the body was cold. Liquidators were selling desks and bookcases I had remembered purchasing personally in the early days of the business — in some cases selling them to former trusted employees who were buying them for their new event businesses. Others were going to work for the competition. Meanwhile, creditors were knocking on my door at all hours of the day and night. I had lost my source of income. I was on the hook for millions in personal guarantees I had signed in order to fuel our expansion. I was at risk of losing my home. And I was dealing with a press that had, as the press usually does, gotten the entire story wrong. And no one was sending flowers. Or calling.

No, death is much easier.

Ten years later, I have recovered. I managed to keep my home by working with our bank to sell some of the assets of the company and by agreeing to help them get recovery via the lawsuit against Avon, which they did. I have three beautiful children who weren’t here ten years ago — triplets, actually — with Jimmy, my incredible partner of twelve years. I learned who my real friends were and are, and developed a much more realistic and mature definition of friendship. I have a less sophomoric approach to trust. Don’t offer it freely, unless you’re prepared for the consequences. I’ve learned that people will take what they want, regardless of their word, if the temptation becomes great enough. And they will concoct all manner of rationalization to justify it. I’ve learned that the adage about innovation is true — that at first, people say your idea is absurd, then they say it was obvious all along, and then they say it was their idea to begin with. I’ve learned never, ever to sign a personal guarantee, unless you can afford to lose the entire amount.

There is no particular lesson here beyond these. I haven’t lost my daring or my enthusiasm for life or business. But it would be inauthentic to say that the loss doesn’t hurt deeply, even ten years later.

I don’t have seven bullet points on what to do when the unthinkable happens. The ten-year anniversary of it all just requires its recounting. And, this being Harvard Business Review, and Pallotta Teamworks having been a business (Harvard Business School conducted a case study on us back in 2000, by the way) it feels fitting to convey to readers here that the unthinkable can happen, and it is not something they prepare you for in business school. So, make sure you have a good therapist in your court if you’re an entrepreneur out on the cutting edge. The therapist won’t cut and run. And she may well keep the “everything” you lose from including your sanity. Perhaps more. It’s serious business, losing a business.

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